Feud lifts oil prices higher

Published 10:36 pm, Monday, February 20, 2012

Oil prices jumped to a nine-month high above $105 a barrel on Monday after Iran said it halted crude exports to Britain and France in an escalation of a dispute over the Middle Eastern country's nuclear program.

By Monday afternoon, benchmark March crude was up $2.02 to $105.26 per barrel in electronic trading on the New York Mercantile Exchange, the highest since May. The contract rose 93 cents to settle at $103.24 per barrel in New York on Friday.

Oil prices also rose on hopes that Greece's new bailout deal would be approved on Monday, as well as by China's decision to boost money supply in a bid to spur lending and economic growth.

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Iran's announcement will likely have minimal impact on supplies, analysts said, because only about 3 percent of France's oil consumption is from Iranian sources. Britain had not imported oil from the Islamic republic in six months.

"The price rise is more a reflection of concerns about the further escalation in tensions between Iran and the West," said commodity analyst Caroline Bain of the Economist Intelligence Unit. "Banning the tiny quantities of exports to the U.K. and France involves very little risk for Iran — indeed quite the opposite, it catches the headlines and leads to a higher global oil price, which is something Iran is very keen to encourage."

Markets in the United States were closed Monday for the Presidents Day holiday.

Iran's oil ministry said Sunday it stopped crude shipments to British and French companies in an apparent pre-emptive blow against the European Union after the bloc imposed sanctions on Iran's crucial fuel exports. They include a freeze of the country's central bank assets and an oil embargo set to begin in July.

The EU sanctions, along with other punitive measures imposed by the U.S., are part of Western efforts to derail Iran's disputed nuclear program, which the West fears is aimed at developing atomic weapons. Iran denies the charges, and says its program is for peaceful purposes.

Iran's oil minister, Rostam Qassemi, had warned earlier this month that Tehran could cut off oil exports to "hostile" European nations. The 27-nation EU accounts for about 18 percent of Iran's oil exports. Tehran also is considering extending the embargo to other European countries, a semiofficial Iranian news agency reported Monday. The announcement came as U.N. nuclear inspectors began a two-day visit to Tehran.

The International Atomic Energy Agency team's trip is the second in less than a month, reflecting growing concerns over alleged weapons experiments — something Iran has so far both denied and refused to discuss. The scientists sought to meet Iranian nuclear scientists and visit a key military facility as they try to gauge allegations that Iran is pushing toward making an atomic weapon.

Herman Nackaerts, a senior U.N. nuclear official, said in Vienna before the team departed on Sunday that he hoped for progress in the talks, but his careful choice of words suggested little expectation the meeting will be successful.

The trip came as Iran announced air defense war games to practice protecting nuclear and other sensitive sites, the latest in a series of military maneuvers viewed as a message to the West that Iran is prepared both to defend itself against an armed strike and to retaliate.

The U.S. and Israel have not ruled out military action against Iran's nuclear program, which they say is geared toward making weapons. Iran denies the charges.

Iran's state radio said Monday the IAEA inspectors hope to meet Iranian nuclear scientists and visit the Parchin military complex. The report said the IAEA had requested to visit Parchin, an Iranian military base and conventional weapons development facility outside of Tehran. The site also has been suspected of housing a secret underground facility used for Iran's nuclear program, a claim denied by Iranian authorities.